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The importance of obtaining a financial order following divorce

The importance of obtaining a financial order following divorce

When a married couple separates, the court can make orders in respect of all types of assets (capital, pensions and income) held in their sole or joint names.

The court system is highly discretionary and the court has wide powers to redistribute assets regardless of how they were acquired or whose name they are held in.

Here, we explain why separating spouses should always obtain a financial order to fully resolve their claims against one another.


What happens if I don’t obtain a financial order after divorce?

If a couple fails to obtain a financial order following divorce, either party will be able to make a financial claim against the other at any time in the future (potentially many years after separation).

Even if a couple has no assets to divide, it’s still advisable to obtain a ‘clean break’ order to dismiss any claims.


Wyatt v Vince — a word of warning

No case highlights the importance of obtaining a financial order more clearly than Wyatt v Vince. The case involved a couple who divorced in 1992. At that point, they had no assets to share. Yet many years after separating, the former husband established a green energy business and became a multi-millionaire.

In 2011, the former wife made an application to the court for a financial order. She was successful in securing a lump sum of £300,000. While this only represented a fraction of the former husband’s wealth, the sum was significant given the passage of time that had passed since their divorce.


Obtain a financial order at the earliest possible opportunity

A recent judgement handed down by Lord Justice Peel (namely HAT v LAT [2023] EWFC 162) reinforces the importance of obtaining a financial order at the earliest possible opportunity following a divorce.

The case concerned a couple who divorced in 1998. They entered into a deed of separation on 16 February 1994. The deed confirmed that the former husband would provide his ex-wife with a lump sum of £702,000 and that thereafter there would be a clean break.

For reasons unknown, the deed of separation (which was signed by both parties) wasn’t converted into a binding financial order. Equally — despite the terms of the deed providing for a clean break’ — the former husband continued to provide the former wife with generous financial support post-separation. His support included paying her utility bills, providing her with a generous allowance of £8,500 per month and giving her more than £2m to facilitate the purchase of a property.

The former husband informed his ex-wife in March 2022 that he would be withdrawing his financial support to her going forward. He started to reduce his allowance payments in July 2022 before ceasing his payments altogether in December 2022.

His ex-wife made an application against him on 30 May 2023. She sought interim maintenance (maintenance payable until a final financial order is made) and a legal services payment order (a lump sum from her ex-husband to fund her legal expenses in respect of pursuing a wider financial claim against him).

Lord Justice Peel didn’t accept the former husband’s argument that his ex-wife’s financial claims are “doubtful or speculative”, though he did accept that they would be “restricted in view of the passage of time and the deed of separation”. Nonetheless, he felt that the former husband’s ongoing post-separation support to his ex-wife had “generated dependency” and should therefore continue until a final settlement is obtained.

On that basis, Lord Justice Peel ordered the husband to reinstate his maintenance payments of £8,500 per month to the wife, pending a final financial order. He also ordered the former husband to provide his ex-wife with a lump sum of £200,000 for the purposes of paying her legal costs in her application against him. He noted that the husband had an experienced legal team and that there is no reason why the wife shouldn’t have the same level of legal support. Likewise, the legal services payment order was intended to “level the playing field, which would otherwise lean heavily in the husband’s favour”.

If the parties had converted their deed of separation into a financial order in 1994 — and secured a ‘clean break’ — the court wouldn’t have had the power to make a further financial order between them, even if the former husband had continued to generously support his ex-wife on a voluntary basis following the order.

This case — like Wyatt v Vince — is a clear example of the importance of obtaining a financial order as soon as possible following separation.

If you need advice in respect of financial orders or any other family law issue, talk to our award-winning team.

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